[ PHILIPPINES ] The Department of Transportation (DOTr) abruptly terminated a plan to auction off to the private sector the operations and modernization of five regional airports

14 June 2017

A PHP 108 billion deal that generated strong interest from the private sector, as evidenced by the active participation of highly-qualified local and international players. The scrapping of the auction, involving the Davao, Bacolod, Iloilo, Laguindingan, and New Bohol (Panglao) airports, was announced by the Public Private Partnership Center on 23 May 2017. It said the Government would instead pursue the development of the airports ‘through other modes’, e.g. by funding the development itself.
The PPP project was carried over from the Aquino Administration. Being implemented by the DOTr and Civil Aviation Authority of the Philippines, its auction was deferred under the previous Administration since it came too close to the 9 May 2016 polls. It would have been the second airport PPP after Mactan-Cebu International Airport, won by the Megawide Construction Corp. and India’s GMR Infrastructure in 2014.
In its statement, the PPP Center defended the project - and the entire PPP programme - as it sought to combat the perception by some that it was being sidelined under the Duterte Administration. “While the PPP Center believes in the credibility of these airport projects, structured as PPP, and gratefully acknowledges the solid interest of the private sector, we respect DOTr’s and CAAP’s authority and their decision to terminate the projects,” the PPP Center said. It cited successful PPPs under Mr Aquino that gave Filipinos the first steps toward a modernized Cebu International Airport, two new expressways in Metro Manila, and more public classrooms through school infrastructure projects. “It is clear that PPPs remain as a viable option in the procurement of infrastructure projects, especially those that require an integrated approach (i.e. design-build-operate-maintain) in order to save on procurement timing, reduce interface risks, and avail of private sector’s technology and efficiency,” the PPP Center said. The Duterte Administration had communicated a different approach, stating a preference for the Government to first build the projects and then bid out the operations and maintenance contracts to the private sector. It said this was part of the administration’s ‘hybrid’ approach to PPP projects as this policy would lower the cost of public services since there would be no heavy investments for the private sector to recover. This was a departure from the previous PPP practice wherein private sector handled both the development cost as well as the operations and maintenance aspects. Another shift is the plan to get more funding for projects from China, given warming ties between Manila and Beijing under Mr Duterte.
In November 2016, the Board of the National Economic and Development Authority (NEDA) had approved the un-bundling of the airport projects (#1044.OPS6). This meant each airport project would be bid out individually instead of the initial structure of bidding, which allowed the auction of the five airports in two separate packages. Then last month, Transportation Secretary Arthur Tugade said they would likely remove Davao International Airport - the most coveted asset from the five gateways - from the mix and the DOTr would develop Davao Airport, then eventually bid out the operations and maintenance to the private sector. The latest deadline for the submission of pre-qualification requirements for the project was set on 15 June 2017. It had been delayed several times on account of shifting policy. Five groups were pre-qualified during the original process. These were the Metro Pacific Investments Corp.; San Miguel Corp. with South Korea’s Incheon Airport; Aboitiz Equity Ventures with VINCI Airports; Megawide Construction Corp. and India’s GMR Infrastructure; and the Filinvest Group with Japan’s Sojitz and Jatco.